Tesla Motors, founded by Elon Musk, is a decade old company that specializes in the production of 100% electric cars targeted at the high end market. Its recent gains have helped increase Musk’s wealth by over $500 million. Let’s take a look at the catalysts that have helped the stock sky-rocket since it first broke through its moving averages in may of 2013.
A recent series of chain reactions have helped company pull in many billions from market cap growth, allowing them to repay a loan of $500 million back to the government 10 years early. This growth was set off by the company reporting a surprise first quarter profit that greatly topped analysts' expectations. In fact, this was the first time the company reported a profit since it's founding!
Next, the company received an excellent rating for its Model S car, which propelled sales at a record pace. The company was added onto the Nasdaq 100, replacing the computing giant Oracle. Also, the company has reported weekly sales topping 500 for the first time. This translates to approximately revenue of $1.5 Billion, much higher than the $950 million pulled in last year. CEO Elon Musk has expressed his intent to control 50% of the luxury car market in Hong Kong, which could allow revenue to shoot past $2 Billion in the next few months!
One problem Tesla faced in recent years was its ability to sell cars directly to consumers. Currently, about 3/4 of the states in the USA do not allow Tesla to open dealerships. The company is forced to rely on rival companies, or Internet marketing. This poses a huge problem for the company, as it cannot expand the reach of its brand. In addition, rival companies have hired lobbyists in D.C. to try to ensure that Tesla can't reach a larger consumer base. However, just this month the company signed a petition of well over the goal of 100,000 signatures, aiming to change the laws that prevent its expansion.
More recently, Tesla reported a surprise second quarter profit while most analysts were expecting a loss. It sold over 5,100 cars while analysts were expecting 4,500. This sent its stock price up 15% in one day. Tesla is currently extremely overvalued at $17 billion, which has caused a number of analyst downgrades. Despite this, the stock has continued its rapid gain past the $150 mark, representing a gain of 700% since its 2010 IPO.
Tesla not only earns money from selling its cars, but also from selling government initiated carbon credits. As global warming becomes an increasingly looming threat, the United States government has set limits on the amount of carbon emissions that can be produced by large corporations. Since Tesla is highly eco-friendly, it is able to sell its unused carbon credits. Last quarter, this helped the company pull in over $50 million.
The Tesla Model S has been given a 99 out of 100 by Consumer Reports. This makes it one of their highest rated cars, and they described it as “the best car they have ever tested.” Just because the car has been designed for the experience, doesn’t mean that the company left out the basic areas of safety and function. When crash tested by National Highway Traffic and Safety Administration, the car received five stars. In acing the tests, the Model S has demonstrated its reliability and durability.
Unlike most cars of its size, the Model S can seat 5 adults with the additional option of seating two children in the rear facing seats located in the trunk. The car comes with a 17-inch touchscreen and two USB connection ports. The Model S can be linked to 3G, allowing you to listen to online radio or use Google Maps. Its rear facing cameras allow the driver to have a 360 degree view when driving. The charging ports are designed to utilize either 240 volt or 110 volt outlets, fully charging the car overnight.
The Model S can reach speeds of 130 mph with EPA certification for up to 265 miles. Due to being purely electric, the Model S produces no emissions and has no need for a tailpipe. With an all-glass UV protected roof, the driver receives the full experience of driving a luxury vehicle.
Tesla’s Model X SUV is also 100% electric, and is due to be released in 2014. Its price is expected to range between $30,000-$40,000. Most minivans are currently priced in this range, so the fact that the Model X is electric actually gives it a competitive edge. With its Falcon Wing doors and aluminum steel structure, it is the embodiment of Tesla in every way. In addition, Tesla is planning on making its Generation 3 vehicle that will greatly decrease the cost of electric cars. When it is released, it will be targeted at mass markets to expand Tesla’s presence.
Tesla cars can be easily charged at their Supercharger Stations, which are self-boasted to be "The Fastest Charging Station on the Planet." In 20 min, half of the battery can be charged, while 75 min provide a full charge. At these stations, you can also opt to have you battery exchanged for a new one that is fully charged. This takes a mere two minutes and saves a lot of time! The tops of the stations are equipped with solar panels that aid in the provision of green energy. This service is free to all Tesla Car owners.
One issue with theses charging stations is that there are very few of them. As of 2013, there are 17 strategically placed across the east and west coasts of the United States. They are spaced so that someone traveling across the coasts will reach another station just before their car runs out of power. This provides a real problem for owners of these cars who don't receive the full benefits of owning a Tesla, and must charge at home. However, the company has stated that they have full intent to exponentially increase this number within the next few years. They hope to achieve a 98% coverage of the US and Canada by the year 2015.
The volatility of Tesla makes it an extremely dangerous and unpredictable stock. Though the company itself has great growth potential, its stock might be overvalued by billions given its current market cap.
Disclaimer: Trading stocks has extremely high risks, and should not be taken to lightly without a thorough understanding. This is written from a purely commentary point of view and is not meant to suggest buying, selling, or holding a stock. All traders must do their own research prior to investing. We (StockQuests) are unaffiliated with all of the companies that are mentioned on this blog, and can't be held responsible for any losses that may occur. Invest at your own risk.
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